Recession and Recovery August 29, 2017 Nicola Sapp Chief Financial - PowerPoint PPT Presentation

E L P ASO C OUNTY C OLORADO TABOR Recession and Recovery August 29, 2017 Nicola Sapp Chief Financial and Administrative Officer

Presentation Overview • Remember the Great Recession – National, Colorado Springs and El Paso County • County deferred maintenance / layoffs • Great Recovery – Sales and property taxes • TABOR cap formula implications • Solution • Next Steps El Paso County Administration and Financial Services 2

Remember the Great Recession El Paso County Administration and Financial Services 3

El Paso County Administration and Financial Services 4

The Great Recession February 2008 – February 2010 (R.I.P.?) Nationally – 8.7 million jobs lost – GDP contracted 5.1% – Lehman Brothers – Chapter 11 – Washington Mutual – Chapter 11 – General Motors – government still owns 32% – General Growth Properties – Chapter 11 – Charter Communications – Chapter 11 El Paso County Administration and Financial Services 5

El Paso County Administration and Financial Services 6

The Great Recession February 2008 – February 2010 (R.I.P.?) Colorado Springs • Parks grass dies – parks restrooms locked • Medians are overtaken by weeds • Streetlights turned off – Unemployment peaks at 9.6% El Paso County Administration and Financial Services 7

8

The Great Recession February 2008 – February 2010 (R.I.P.?) El Paso County – Cuts more than 200 positions – Reduces parks hours – Temporary Assistance to Needy Families, Food Assistance, and Child and Senior Protection cases skyrocket and case workers are spread far too thinly – Bi-annual assessment process fails to track recovery El Paso County Administration and Financial Services 9

The Great Recession February 2008 – February 2010 (R.I.P.?) El Paso County • Property tax collections lag two years after recovery begins • Deferred maintenance catches up to County Facilities – Flu vaccines lost in HVAC failure at County Health – Fire Department issues warning on over capacity DHS Facilities – County I.T. runs critical databases on obsolete VAX systems El Paso County Administration and Financial Services 10

El Paso County Administration and Financial Services 11

The Great Recession February 2008 – February 2010 (R.I.P.?) El Paso County • 14 year-old county plows and graders experience 50% failure rates in snow storms of more than 1-day duration • Deferred Road and Bridge backlog soars to $200 Million El Paso County Administration and Financial Services 12

The Great Recession February 2008 – February 2010 (R.I.P.?) Overworked DHS Caseworkers miss warning calls and mailed audio tape 2-year-old child dies in foster care El Paso County Administration and Financial Services 13

Great Recovery El Paso County Administration and Financial Services 14

Great Recovery Historical Sales Tax Collections Sales Tax (in Millions) $100 $96M $95 Great Recovery - Economy Strong $90 $85 $80 $75 $69M $69M Prerecession $65M $70 Takes 4 years to get Midrecession back to prerecession $65 $60 2007 2009 2011 2016 El Paso County Administration and Financial Services 15

Great Recovery Historical Property Taxes and Values Property Tax (in Millions) $49M $50 $47M $48 $45M $46 $42M $44 $42 $39M $40 $38 $36 2007 2009 2011 2012 2017 Property Values (in Billions) $60B $61 $57B $59 $53B $57 $54B $55 $53 $51 $46B $49 $47 $45 2007 2009 2011 2012 2017 16 El Paso County Administration and Financial Services

Great Recovery County Efforts – Able to address local share of Four Nationally Declared Disasters in Four Years – Strategic Moves Initiative significantly addresses failing building infrastructure – Dedicated Public Safety tax addresses significant deficits in Public Safety – Able to start addressing critical operational and capital backlogs – Five Year Financial Roadmap illustrates County finally heading in right direction after over a decade of financial challenges (only roads left unfunded) El Paso County Administration and Financial Services 17

TABOR Cap Implications El Paso County Administration and Financial Services 18

TABOR Cap Implications – TABOR allows a significant reduction during bad economic times, does not allow for a strong recovery 80,000 YEAR 1 - 70,000 Employed 60,000 Earn $50,000 50,000 40,000 30,000 YEAR 3- 20,000 Get New job Earn $50,000 YEAR 2 – 10,000 Can Only Keep Lose Job/ Pick $11,500 0 up Part-Time Work Earn $10,000 El Paso County Administration and Financial Services 19

TABOR Cap Implications WITH TABOR RESET - * ADDRESS COUNTY CRITICAL NEEDS *INVEST TENS OF MILLIONS IN FAILING INFRASTRUCTURE CURRENT SITUATION TABOR CROSSROADS WITHOUT TABOR RESET - *NOT ADDRESSING COUNTY CRITICAL NEEDS *NOT INVESTING IN FAILING INFRASTRUCTURE *BUDGET CUTS OF TENS OF MILLLIONS *DEVASTATING TO COUNTY El Paso County Administration and Financial Services 20

TABOR Cap Implications $300 Revenue Base Comparisons $6.8M Refund or Zero $8.8M Refund Covered with 1.091 Mill Reduction & Eliminate BPPT $15.5M Refund or Zero $16.6M Refund or Zero $250 Decrease Mill .339 due to 5.5% Limit $2.0M Tabor Refund $15.2M Refund Economic Downturn Revenue Decrease $2.3M Negative CPI Growth Decrease Mill .518 due to 5.5% Limit $200 Start of Great Recession Millions $150 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Est Est Est Est Est Est CPI New Construction Original TABOR Base Reduced TABOR Base Ballot Effect El Paso County Administration and Financial Services 21

Formula Implications $25 Annual TABOR Revenues Collections Versus Cap $20 $15 Millions $10 $5 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ($5) CPI New Construction Actual Revenue Tabor Capped Revenue El Paso County Administration and Financial Services 22

Formula Implications Comparison of CPI versus El Paso County Sales Tax 8.57% 8.46% 6.56% 5.38% 4.68% 3.69% 2.74% 2.71% 1.87% 2.77% 1.18% 2011 2012 2013 2014 2015 2016 -0.65% Sales Tax Growth CPI El Paso County Administration and Financial Services 23

Solution to this Unique Situation El Paso County Administration and Financial Services 24

Solution – Reset the Revenue Base • “Without imposing new taxes or raising tax rates…” • $14.5M – 2016 revenue retention – $12M – I-25 Gap local share and other roadway safety projects – $ 1M – remaining disaster recovery projects – $ 1.5M – parks, trails, and open space – Resets revenue base to 2017 actual – Retains TABOR limitations (not De-TABORing) El Paso County Administration and Financial Services 25

Solution Draft Ballot Language WITHOUT IMPOSING NEW TAXES OR RAISING TAX RATES, SHALL EL PASO COUNTY BE PERMITTED TO RETAIN AND SPEND $14,548,000 IN EXCESS 2016 REVENUE AS A VOTER-APPROVED REVENUE CHANGE PURSUANT TO TABOR (ARTICLE X, SECTION 20 OF THE COLORADO CONSTITUTION) TO INVEST ONLY IN THE FOLLOWING INFRASTRUCTURE:  THE I-25 CORRIDOR GAP LOCAL SHARE AND OTHER ROADWAY SAFETY AND IMPROVEMENT PROJECTS, UP TO $12 MILLION;  DISASTER RECOVERY PROJECTS; AND  PARKS, TRAILS AND OPEN SPACE PROJECTS, WITH THE UNDERSTANDING THAT SUCH EXCESS REVENUE WOULD OTHERWISE BE REFUNDED ONLY TO TAXABLE REAL PROPERTY OWNERS AS A ONE-TIME TAX CREDIT (EXAMPLE: APPROXIMATELY $40 FOR A TYPICAL SINGLE-FAMILY HOME VALUED AT $250,000), AND TO RETAIN AND SPEND IN THE 2017 FISCAL YEAR AND THEREAFTER AN AMOUNT OF REVENUE THAT EXCEEDS CURRENT TABOR LIMITATIONS BUT IS NO GREATER THAN THE COUNTY REVENUE CAP, WHICH CONTINUES TO LIMIT FUTURE REVENUE GROWTH AS PROVIDED IN RESOLUTION NO. 17 - ___? El Paso County Administration and Financial Services 26

Next Steps – September 5 th • Second Public Hearing on Ballot Question • BoCC to Take Vote to Put on the Ballot – 2018 Budget Process • Two 2018 Budgets Prepared • September 21 st - Preliminary Balanced Budgets • October – Original Adopted Budget Hearings • November 7 th – Election Day • November 16 th – Adopt 2018 Budget El Paso County Administration and Financial Services 27